All British troops will be pulled out of Iraq by the end of 2008, starting with the withdrawal of 1,000 in the early summer, the Guardian has learned.

Tony Blair is to announce the moves - the result of months of intense debate in Whitehall - within 24 hours, possibly later today, according to officials.

The prime minister is expected to say that Britain intends to gradually reduce the number of troops in southern Iraq over the next 22 months as Iraqi forces take on more responsibility for the security of Basra and the surrounding areas.

Ministers have taken on board the message coming from military chiefs over many months - namely that the presence of British troops on the streets of Basra is increasingly unnecessary, even provocative. The reduction of just 1,000 by early summer cited by officials yesterday is significantly less than anticipated in reports that British troops in southern Iraq, presently totalling 7,200, would be cut by half by May.

A more cautious reduction may reflect concern expressed by the Iraqi and US governments about British intentions. The US has privately admonished Britain claiming it is interested only in Basra. British ministers and officials say the situation in the Shia-dominated south cannot be compared to Baghdad, which is plagued by Sunni-Shia sectarian violence.

Under the plan due to be outlined by Mr Blair, British troops will gradually move into a single base on the outskirts of Basra. They will continue to take part in operations but in a role supporting Iraqi security forces rather than leading them, according to defence officials.

They will also continue operating long range desert patrols in Maysan province, north of Basra, along the border with Iran - a mission pressed on Britain by the US which says it is concerned about the smuggling of weapons from Iran. By the end of next year, all but a few army instructors will have left the country.

Military commanders insist they are encouraged by evidence that the Iraqi army and even local police are now able to maintain order in southern Iraq. As evidence of progress, Britain yesterday handed over control of an Iraqi army division based in Basra in what it called "a significant step towards Iraqi forces taking responsibility for security in the city".

For the first time the Iraqi army's 10th division, trained by British troops, will take orders from Iraqi military headquarters in Baghdad. Until now, it has been under British control. Major General Jonathan Shaw, British commander in southern Iraq, signed a memorandum of understanding with General Abdul Lateef Thu'ban, the 10th division commander.

British defence officials also say they have been encouraged by the role played by Iraqi forces in Operation Sinbad, a winter-long campaign designed to root out criminals and supporters of Shia militia from the Basra police force. In last week's Operation Troy, Iraqi and British forces sealed the city of Basra and set up checkpoints at border crossings with Iran.

Mr Blair gave an upbeat message when interviewed on Sunday AM on BBC1. "It is absolutely true, as we have said for months, that as the Iraqis are more capable in Basra of taking control of their own security we will scale down. But you've got to make sure you have sufficient forces in support and in reserve to be able to help the Iraqis if a problem arises," he said.

Yesterday a bomb destroyed a truck carrying chlorine north of Baghdad, killing at least five people and spewing toxic fumes that left 140 others ill, Iraqi police said. It was not immediately clear if the blast was caused by a roadside bomb or if the truck was rigged with explosives as a makeshift chemical gas bomb.

In Baghdad, a suicide bomber and two car bombs killed at least 17 yesterday and police said 20 unidentified bodies were found on Monday, a spike in the daily toll after a marked reduction since the start of a US-backed security crackdown.